Goldman Sachs Downgrades Earnings Growth Forecast to 11%

The S&P 500 earnings per share grew 51% year-over-year in the second quarter, exceeding the historical relationship between long-term trends and economic growth.

Goldman Sachs notes that there are three temporary drivers behind the current unusually high earnings: AI capital expenditure, semiconductor margin expansion, and equity investment gains from mega-tech companies. However, these factors will weaken next year, and earnings growth will return to normal levels.

The bank's base case scenario involves a slowdown in earnings growth, not a collapse. EPS growth is projected at 11% for both 2027 and 2028, reaching $415 and $460, respectively.